Japanese carmakers and their Chinese joint venture partners lost big-time in the spat over the Diaoyu/Senkaku islands. The winners are German carmakers and their Chinese joint venture partners. Oddly enough, the central government ends up with a shot in the foot.

German brands emerge as the (not for TTAC readers) surprising winner of the war of words over uninhabited rocks. Sales of German branded cars rose between 10 percent in the case of Mercedes and 55 percent in the case of BMW. The biggest winner in terms of volume is Volkswagen. In September 2012, Volkswagen passenger cars sold 40,000 units more in China than in September 2011, Audi added 6,000 units. On a group level, Volkswagen should have increased its September sales by close to 50,000 units, about double its losses in Europe.

GM missed out on a chance to take global market share from its Japanese rivals.

Little contemplated: Each car lost for Japan’s makers is a car lost for a Chinese company. Foreign automakers must have joint ventures with Chinese entities, and most of them are government-owned.

A strange pattern emerges: On the losing side are mostly central government owned companies: FAW, Changan, and Dongfeng belong to the central government. GAC is owned by the Guangdong province and its capital city of Guangzhou.

On the winning side are (mostly) independent Brilliance, Beijing-owned BAIC, Shanghai-owned SAIC, and FAW. FAW loses on the Toyota side, but wins on the Volkswagen and Audi side, we’ll call that a draw until better numbers come in.

Translation: “Even if China becomes nothing but tombstones, we must exterminate the Japanese; even if we have to destroy our own country, we must take back the Diaoyu Islands.”

In the comedy and tragedy that is human warfare, I can imagine that the next world war will be started by the Japanese adult film industry using WWII officer uniforms and starlets from all the SE Asian nations. That release will escalate into mass riots, hate crimes against overseas Japanese, military invasions of various islands and nations, and a nuclear North Korean response…

The question should be “WHY haven’t American brands been able to capitalize on Japan’s drop?”.

The market overall went up last month by a fair margin. Certainly a larger jump should be justified as sales should have been taken from Japanese brands. The Chinese don’t have historical animosity towards Americans like the do Japan; the US after-all defeated Imperial Japan.

On this island dispute as well, the public US position was “two sides should not escalate tension” and stayed out of it. Privately however the US is siding with Japan, and have communicated that they will defend the disputed islands if China tries to take it by force. But these sort of diplomatic nuances should be lost on the wider consumers. And most Chinese consumers aren’t mouth-breathing patriots that beat to near-death Toyota drivers as have been shown by the media.

Perhaps we should look at how much impact the government plays into car sales in China. As has been pointed out, all Chinese partners have connections with the Communist part (as does every other business in China). Could America’s unofficial position be hurting GM in China?

The Diplomat explains how the Chinese-government can influence a boycott:
“Unofficial boycotts are possible in China because of the power of State Owned Enterprises (SOEs) and the wider public sector in the economy. Without announcing formal measures which are difficult given WTO rules, there has been a documented effect on trade and sales from nations as well as corporations which have displeased China. This can be in the form of web restrictions such as that currently affecting the free Bloomberg website in mainland China (after Bloomberg published a damaging expose on Xi Jinping’s extended family wealth) or in unpublished policies at state companies (there have been reports that sales of Bloomberg Terminals have plummeted in China). ”

GM has been expanding significantly outside of urban areas recently. As we know, there is now a lottery for urban area car registrations due to congestion, and expansion of cars sales are really dependent on expansion of dealer networks into rural areas. As you say, dealer network matters, but more importantly how distributed the dealer network is matters even more.

VW is at an advantageous position as you mention, but this does not explain the disparity between GM and Hyundai dealerships; which are less diversified than GM and have had a larger increase in monthly sales this last month.

Dongfeng is partnered with Nissan & Honda:
Guangzhou is partnered with Honda & Toyota:
“Japanese brands will account for just over 50% of Dongfeng’s total unit sales this year, while at Guangzhou they will account for virtually all passenger-vehicle sales.”

The winners will be Geely (pure-play domestic brand) and Brillance (which has few Japanese ties).